Start Your Own Micro-lending Business

A micro-lending business is one that lends small amounts of money, usually to individuals or micro
businesses. This venture, if properly run, is very lucrative as the demand for cash is present in almost every
community.

People and small businesses go to micro-lenders even if the interest rate is higher than banks. The first and
most important reason is the difficulty in obtaining small loans from banks. Secondly, when the need is
urgent, banks cannot beat the instant availability of cash offered by micro-lenders. Third is that micro-lenders
usually do not require collateral, while banks generally need to have collateral before they release the loan.

If you are going to start your own lending company, here are the steps to take:

Comply with registration requirements. The company must be in the form of a corporation so it must
register with the Securities and Exchange Commission (SEC). You will need a minimum of one million pesos
paid-up capital. Besides the SEC, you also have to register with the barangay, City Hall, BIR, SSS, HMDF and
Philhealth.

Know the current legal requirements. There is a law called the “Lending Company Regulation Act of 2007,”
which governs the micro-lending business. Other pertinent laws to comply with is the “Truth in Lending Act”
which requires you to disclose in writing the computation of interest, charges and other matters related to
the loan. Note that there are other laws that should be complied with.

Study your target market. This is essential to guide you on where to locate your business, your renovation
expenses, marketing and other matters. Know where there are the best opportunities and the least
competition. Even the way your office looks would have to be in accordance with the income bracket of your
target market. Your study of the market would also be very useful to determine the type of loans to offer.

Hire the right employees. You will need only three employees if you are just starting and each of them has a
critical role. There must be a loan application processor, collector and bookkeeper. Your loan processor and
bookkeeper must have a meticulous personality. A single mistake and you may be unable to recover your
loan or, in the case of the bookkeeper, get you into trouble with the regulatory agencies. Your collector must
have both patience and firmness at the same time in dealing with your clients. Remember to be careful in
selecting your employees because it will be almost impossible to change their personality if you find them
unsuitable for the position.

Learn how to screen and collect from clients. This is actually the core competence that you must develop in
order to be successful in money-lending. Know what borrowers you must avoid and how to detect them.
Learn the C’s of credit assessment, among which are Character, Capacity, Capital and Collateral. In the matter
of collection, it is vital to know what you can legally do to avoid complications. Recently, the small claims
court was established for loans whose principal is not more than P100,000. This may save you money
because no lawyers are allowed in the proceedings.

Micro-lending can be your passport to riches, but like all ventures, you need to know how to operate the
business.

To know more about this business, BusinessCoach, Inc., a leading business seminar provider, conducts an
excellent seminar on this entitled Starting a Micro Lending Business. Contact (02) 727-5628, (02) 727-8860,
(0915) 205-0133 or visit www.businesscoachphil.com for details.

Click here to view details of the seminar: How to Start a Micro-Lending Business »

http://www.businesscoachphil.com/start-your-own-micro-lending-business

How to Open a Lending Investor in the

Philippines
All you need to know on how to open, start and setup a
lending investor in the Philippines (Lending Business or
Loan Company)
Definition: Lending Company shall refer to a corporation engaged in granting loans from
its own capital funds or from funds sourced from not more than nineteen (19) persons. It
shall not be deemed to include banking institutions, investment houses, savings and loan
associations, financing companies, pawnshops, insurance companies, cooperatives and
other credit institutions already regulated by law. The term shall be synonymous with
lending investors.
Form of Organization
A lending company may only be established as a corporation. This excludes a sole
proprietorship or a partnership from operating a lending business. No lending company shall
conduct business unless granted an authority to operate by the SEC.
Corporate Name Requirement
The corporate name must include the words “Lending Company” or “Lending Investor” or
any other word descriptive of its primary activity of granting loans to the public except words
commonly used to identify financing companies shall always be included in the corporate
and trade name.

Minimum Capital Requirement

The minimum required paid-in capital is One Million Pesos (PHP1,000,000.00) for the head
office. Additional capital is required for each branch, extension, satellite office or unit
established, the excess of the required minimum paid-up capital may be applied to the
additional capital requirement as follows:

PHP300,000.00 : Metro Manila and other first class cities;

PHP150,000.00 : Second class and other cities;

PHP 75,000.00 : Municipalities.

Foreign Ownership of a Lending Investor

100% foreign ownership of a lending investor is allowed. No foreign national may be
allowed to own stock unless the country of which he is a national accords reciprocal rights
to Filipinos. More than 40% foreign ownership requires a minimum paid-in capital of US$
Two Hundred Thousand (USD200,000.00) .
Size of Loan and Interest
A lending company may give loans in such amounts and reasonable interest rates and
charges as may be agreed upon between the lending company and the debtor: Provided,
That the agreement shall be in compliance with the provisions of Republic Act No. 3765,
otherwise known as the “Truth in Lending Act” and Republic Act 7394, otherwise known as
the “Consumer Act of the Philippines”. As of August 19, 2013 there are no usury laws which
limit the interest rate a lending investor my charge loan recipients. The Supreme Court has
reduced the interest rate, in some cases as being excessive, iniquitous, unconscionable
and exorbitant, hence, contrary to morals (“contra bonos mores”), if not against the law.

In accordance with the Truth in Lending Act and prior to the consummation of the
transaction, a lending company shall furnish each debtor a disclosure statement, setting
forth, to the extent applicable, the following information:

i. The principal amount of loan;

ii. Rate of interest of the loan;
iii. Service or processing fee, if any;
iv. Amortization schedule;
v. Any penalty charge for late amortization payment;
Requirements for Securing an Authority to Operate a Lending Investor from the SEC

i. Information Sheet;

ii. NBI clearance of Filipino directors/officers;

iii. Foreign directors/officers, shall submit a clearance from the Bureau of Immigration (BI), a
photocopy of his passport showing a valid visa or stay in the Philippines, ACR i-card, and a
work permit issued by the Department of Labor and Employment;

iv. President’s Sworn Statement and Undertaking that the corporation will not accept or
solicit investments, other than loans, from more than 19 persons without SEC approval, and
upon presentation of valid claims, it shall immediately indemnify or return the investments of
persons from said unauthorized public solicitation of funds; Moreover, the sworn statement
shall likewise contain an undertaking that the country or state of the foreign applicant allows
Filipino citizens and corporations to do lending business therein.

v. Business plan including method of marketing its product and sources of the funds and
maturities of credit; and

vi.Statement of its compliance with Rule 17.1(2)(A)(i) and (ii) of the Amended Implementing
Rules and Regulations of the Securities Regulation Code.

Branches, Extension or Satellites Offices or Units

i. Loan transactions shall be booked in the authorized offices of the lending company;

ii. No lending company shall establish or operate a branch, extension office or unit or
satellite office without prior approval by the SEC. The following documents shall be
submitted for the opening of a branch office:
1) Information Sheet on the proposed branch;

2) NBI clearance of the manager, cashier and administrative officer of the proposed branch;

iii. The Certificate of Authority to operate a branch, extension office, unit or satellite office
shall be coterminous with that of the Head Office.

SEC Licensing Fees (for secondary license):

i.Initial Application Fees shall be paid to SEC at the time of filing of application.

1) Head Office –

A fee of 1/10 of 1% of the paid-up capital of the lending company shall be paid for the
issuance of a Certificate of Authority to Operate as a Lending Company.

2) Branch, extension office, unit or satellite office

A fee of 1/10 of 1% of the assigned capital of the branch, extension office, unit or satellite
office shall likewise be paid for the issuance of an original Certificate of Authority.

ii. Annual fee –

An annual fee shall be paid not later than forty five (45) days before the anniversary date of
the CA.
1) Head Office – 1/8 of 1% of the required paid-up capital

2) Branch Office – 1/8 of 1% of the required paid-up capital

Commencement of Operations
A corporation/company that has been duly registered and granted a Certificate of Authority
to Operate as a Lending Company shall commence operations within one hundred twenty
(120) days from date of grant of such authority. Failure to commence operations within said
period shall be a ground for the suspension of its CA.

Usage of Funds
Lending Companies shall use at least 51% of their funds for direct lending purposes.

The total investment of a lending company in real estate and in shares of stock in a real
estate development corporation and other real estate based projects shall not at any time
exceed twenty-five (25%) percent of its net worth.
Maintenance of Books of Accounts and Records
(a) Every lending company shall maintain books of accounts and records as may be
required by the SEC and prescribed by the Bureau of Internal Revenue and
other government agencies. In case a lending company engages in other businesses, it
shall maintain separate books of accounts for these businesses.
(b) The Manual of Accounts prescribed by the BSP for lending investors shall continue to be
adopted by lending companies for uniform recording and reporting of their operations, until
a new Manual of Accounts shall have been prescribed by the SEC.

Reportorial Requirements
General Information Sheet (GIS) – Within thirty (30) days from annual meeting, as stated
in its SEC approved bylaws
Audited Financial Statements prepared by an external auditor accredited by the
SEC – Within One Hundred Twenty (120) days from end of fiscal year, as stated in its SEC
approved bylaws
Special Forms for Financial Statements in Electronic Format – Within thirty (30) days
from the last day of submission of the annual Audited Financial Statements
Interim semi-annual financial statements (using Special Form) including the following:
• Balance Sheet;
• Income and Expense statement;
• Cash flow
• Statement of Changes in Equity
• Schedule of Liabilities
• List of Directors and Officers
• Aging of Receivables
– Within forty-five (45) calendar days from the end of the interim semi-annual period
covered by the report.

Manual on Anti-Money Laundering

• If foreign participation in voting stocks is more than 40%; or
• If total assets is PHP10M or more
References:
Republic Act No. 9474 “Lending Company Regulation Act of 2007”
Republic Act No. 10881 “An Act Amending Investment Restrictions In Specific Laws
Governing Adjustment Companies, Lending Companies, Financing Companies And
Investment Houses Cited In The Foreign Investment Negative List And For Other
Purposes.”
SEC Reduced Requirements for Financing and Lending Companies
Implementing Rules and Regulations of Lending Company Regulation Act of 2007
(Republic Act of 2007)
SEC Memo No. 3, Series of 2013

https://www.dayananconsulting.com/open-lending-business-philippines/